MBIA Insurance Corporation will receive $110 million to drop its lawsuit against Flagstar Bank, which it will use to repay a portion of its intercompany loan from National Public Finance Guarantee.
MBIA Inc. announced late Thursday that its subsidiary had settled the lawsuit it brought against the Michigan-based bank earlier this year, which related to approximately $1.1 billion of securitization transactions backed by second-lien mortgages that were insured by MBIA Corp. in 2006 and 2007.
“We are pleased to have reached a settlement with Flagstar that brings an end to our litigation without further delay and expense and results in cash and other consideration to MBIA Insurance Corp. in an amount consistent with our recovery expectations,” said Jay Brown, MBIA chief executive officer. “We will continue to focus on resolving our remaining litigation with other parties so that National Public Finance Guarantee Corp., our U.S. muni-only insurer, can resume its role as a leader in the U.S. public finance insurance market.”
MBIA filed suit against Flagstar on January 11, claiming the bank’s “pervasive breach of warranties and contractual covenants that it made to induce MBIA to issue two financial guaranty insurance policies.”
In total, MBIA Corp. paid $165 million in claims on defaulted loans.
MBIA shares jumped 3.30% in after-hours trading Thursday to $9.38.